An easy way to think about a trust is to think of it as a book. The creator of the trust is the author of the book and the main characters of the story are the trustee, beneficiary, and the author. Throughout the story, the author describes how the trustee and beneficiary will interact, what will happen to the author’s assets during the author’s lifetime, who has access to the assets, what happens if the author becomes incapacitated, and what happens when any of the main characters pass away.
In elder law, we deal primarily with two types of trusts; revocable and irrevocable. A revocable trust allows the author to terminate the trust and change the terms of the trust at any time. An irrevocable trust, however, cannot be terminated or changed, except in limited circumstances.
The terms grantor, settlor, trustor, and trustmaker can all be used to refer to the person who creates the trust. The term beneficiary is used to refer to the person who benefits from the trust. The term trustee is used to refer to the person who is in charge of the trust (holds legal title to the assets in the trust) and makes sure that the terms of the trust are followed for the benefit of the beneficiary. The successor trustee is the trustee who steps in if the currently acting trustee becomes incapacitated or dies.
You first need to narrow down your goals. Some common goals include, but are not limited to, avoiding the following: probate, federal estate tax, Pennsylvania inheritance tax, and protecting assets from a nursing home and other creditors. When you review your goals, weigh out the costs and advantages to pursuing each of those goals.
Pennsylvania inheritance tax is much trickier to avoid and, depending on your situation, this may not be a reason to draft a trust.
Depending on your exact situation, a trust may be useful to protect assets from a nursing home. Before drafting a trust for this purpose, you really need to evaluate your current assets, life expectancy and health to determine if creating an irrevocable trust would be appropriate for you. In my next article, I will go into more detail about this type of trust and lay out the pros and cons of drafting such a trust.
Keystone Elder Law P.C. integrates the legal, financial, and care management issues of seniors and their families to allow for a comprehensive and holistic approach to meeting their varied and ever-changing needs. We serve as guides and advocates through the maze of legal, financial, and health care regulations pertaining to each family’s unique situation. Services include Medicaid and long-term care planning, wills, trusts, powers of attorney, and estate administration. *Certified as an Elder Law Attorney by the National Elder Law Foundation, as authorized by the Pennsylvania Supreme Court.